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Medical Care Costs: How Much Welfare Loss?

Joseph P Newhouse

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Hardly a week goes by without a front-page newspaper article on rising health care costs and the uninsured. In this article, I focus mainly on costs, arguing that the issue has been somewhat misconceived: while the level of medical care spending in the U.S. is a cause for concern, the welfare losses associated with rises in that level of spending may not be as large as the public rhetoric can make them seem. In fact, cost containment may not be as urgent as is widely supposed, and some proposed “cost containment” policies may result in welfare losses for the insured and even increase the number of uninsured